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Rural Hospitals Struggle To Stay Open, Adapt To Changes

After 45 years of providing health care in rural western Missouri, Sac-Osage Hospital is being sold piece by piece.

Ceiling tiles are going for 25 cents, the room doors for an average of less than $4 each, the patient beds for $250 apiece. Soon, the remnants of the hospital that long symbolized the lifeblood of Osceola, population 923, will be torn to the ground.

Sac-Osage is one of a growing number of rural U.S. hospitals closing their doors, citing a complex combination of changing demographics, medical practices, management decisions and federal policies that have put more financial pressure on facilities that sometimes average only a few in-patients a day.

"Money just kept drying up," said Chris Smiley, a former operating room nurse who was the last chief executive of Sac-Osage and is now overseeing its liquidation.

A total of 50 hospitals in the rural U.S. have closed since 2010, and the pace has been accelerating, with more closures in the past two years than in the previous 10 years combined, according to the National Rural Health Association. That could be just the beginning of what some health care analysts fear will be a crisis.

An additional 283 rural hospitals in 39 states are vulnerable to shutting down, and 35 percent of rural hospitals are operating at a loss, according to iVantage Health Analytics, a Portland, Maine-based firm that works with hospitals.

Most of the rural hospital closures so far have occurred in the South and Midwest. Of those at risk, nearly 70 percent are in states that have declined to expand Medicaid coverage under the federal Affordable Care Act, although some experts are hesitant to draw a cause-and-effect correlation.

Big city hospitals have been closing at about the same rate as rural ones during the past five years, but an abundance of alternatives in most major metropolitan areas typically lessons the effect on patients. When a rural hospital closes, people may have to travel dozens of miles to reach the nearest hospital, an inconvenience that potentially is a matter of life or death.

When 18-month-old Edith Gonzalez choked on a grape in August 2013, her parents rushed to Shelby Regional Medical Center in their hometown of Center, Texas, unaware that the hospital had closed several weeks earlier. Their daughter was dead by the time an ambulance had taken her to the next nearest hospital, more than 45 minutes later.

In rural North Carolina last summer, 48-year-old Portia Gibbs died from cardiac arrest after waiting 90 minutes for a medical helicopter to arrive. She could have been at a hospital in less than half that time, had not the Vidant Pungo Hospital in Belhaven closed just six days earlier.

Her death prompted Belhaven's mayor to walk 273 miles to the nation's capital in an attempt to raise awareness about the plight of rural hospitals. Mayor Adam O'Neal plans to lead a similar march June 1 with supporters from at least 41 states.

The city now is trying to acquire the old hospital through eminent domain and is seeking $6 million in federal loans to re-open it. Since Gibbs' death, O'Neal said, several others have died before they could make it to farther-away hospitals, including a 16-year-old boy hurt in a farming accident in April.

"We have people needlessly dying," O'Neal said.

Declining populations and stagnant economies make it hard on rural hospitals. Rural areas tend to "have older, poorer, sicker populations," said Michael Topchik, senior vice president of iVantage.

That means they often have a higher percentage of patients covered by Medicare and Medicaid, a pair of government health care programs that pay a lower reimbursement rate than private-sector insurers. Hospitals that rely heavily on those government programs have been particularly hard hit by federal budget cuts and provisions in the 2010 federal health care law that reduced charity care reimbursements and changed other payment criteria.

At Sac-Osage, poor management also played a role in its financial ruin. Some of its doctors, for example, never were approved to be paid by particular insurance companies. And it lost what some staff estimate was $1.5 million to $2 million because the clinic failed to send out thousands of bills to insurers and patients since 2012.

For state Rep. Warren Love, a local cattle rancher who tried to help save Osceola's hospital, its passing now seems sort of inevitable.

"Everything has evolved to the big gets bigger and the littlest disappears," Love said, "and that's really what's happened with these hospitals."

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Q&A: Why Have Rural Hospitals Been Closing?

There are more than 4,700 hospitals in the U.S, spread about evenly between urban and rural areas. But that number has been dwindling.

More than 100 hospitals have closed since 2010, and the pace has quickened in the past couple of years. Hospitals are closing at about the same rate in urban and rural areas, but health care analysts say the effect often is more pronounced in small towns, where residents typically must travel farther to get to the next nearest hospital.

Some answers to common questions about hospital closings:

WHAT IS A RURAL HOSPITAL?

According to federal definitions, rural hospitals are those not located in metropolitan areas. But some hospitals in metro areas also are considered rural, if they are in census tracts with low population densities and longer commutes.

Rural hospitals typically have emergency rooms and inpatient care, but they often lack some of the services of city hospitals, such as intensive care and psychiatric units or chemotherapy and hospice services.

Rural hospitals also tend to be smaller. While about 75 percent of urban hospitals have more than 100 patient beds, just 12 percent of rural hospitals are that large, according to the Rural Health Research Program at the University of North Carolina. It says a typical rural hospital has 25 beds and averages seven patients a day. Rural hospitals have a median profit margin of 2.7 percent, just half that of urban hospitals.

HAVE RURAL HOSPITALS FACED TROUBLES BEFORE?

Yes. About 440 rural hospitals closed during a roughly 15-year period starting in 1983. The closures came after the federal government instituted a new Medicare payment system that provided hospitals with a predetermined, fixed amount for each service. For some low-volume rural hospitals, the payments weren't enough to stay open.

A 1997 federal law created a new category of critical access hospitals, which are located in rural areas without other nearby hospitals. Such hospitals are paid by Medicare based on their reasonable costs. The law has been tweaked several times, and more than half of rural hospitals now are designated as critical access facilities. The National Rural Health Association says the critical access designation helped stem the tide of rural hospital closures during the first decade of the 2000s.

WHY ARE RURAL HOSPITAL CLOSURES INCREASING AGAIN?

Some hospitals have had trouble recovering from the recession, which increased the number of uninsured patients.

Residents in rural areas also tend to be older and sicker than those in cities and less likely to be covered by private insurance, which pays a higher reimbursement rate than the government-funded Medicare and Medicaid programs, said George Pink, deputy director of the University of North Carolina's Rural Health Research and Policy Analysis Center.

As a result, many rural hospitals have been hit harder by federal Medicare budget cuts and provisions of President Barack Obama's health care law, which also reduced Medicare payments. The framers of that law assumed the cuts would be offset as more people gained private insurance or were added to Medicaid rolls. But 21 states have declined to expand Medicaid eligibility.

Poor management decisions also have played a role in the problems facing some rural hospitals, said Keith Mueller, director of the Center for Rural Health Analysis at the University of Iowa. Some rural hospitals have had difficulty forming partnerships with other hospitals, a move that could have reduced costs.

WHAT CAN BE DONE?

States have had mixed results in their efforts to aid struggling hospitals.

St. James Mercy Hospital in Hornell, New York, remains open largely because of state grants and loans. As part of its restructuring, the hospital is scaling back its patient beds and discontinuing its maternity service.

After three rural hospitals closed, Georgia Gov. Nathan Deal's administration announced rule changes last year allowing struggling rural hospitals to eliminate inpatient beds and offer only emergency care and a few outpatient services. But no hospitals signed up for the plan. A committee appointed by Deal recently recommended another approach — a "hub and spoke" pilot program pairing four rural hospitals with other providers in their areas.

Ultimately, rural hospitals might need to redefine themselves, said Brock Slabach, senior vice president of the National Rural Health Association. They may need to convert from inpatient to outpatient surgical centers, perhaps offering care for only 10 to 24 hours, he said. Rural facilities also could offer a variety of post-hospital services, such as in-home monitoring.

"We don't have all the answers right now," Slabach said. "We need to have some experimentation."